New Delhi: A United Nations report on Tuesday claimed that India was still the fastest growing large developing economy and that the country would grow by 7.7 percent in the financial year 2017.

The United Nations World Economic Situation and Prospects (WESP) 2017 report launched today said India’s economy is projected to grow by 7.7 percent in fiscal year 2017 benefiting from strong private consumption and gradual introduction of significant domestic reforms.

The report also predicted a 7.6 percent growth for the financial year 2018.

This report of the UN comes a day after the International Monetary Fund (IMF) cut India’s growth rate for the current fiscal year to 6.6 percent from its previous estimate of 7.6 percent due to the “temporary negative consumption shock” of demonetization.

The IMF, however, stated that the Indian economy was likely to revive to go back to its previously estimated growth rate of 7.7 percent in 2018.

Meanwhile, the UN report however cautioned that low capacity utilisation and stressed balance sheets of banks and businesses will prevent a strong investment revival in the short term.

China’s growth on the other hand is projected to remain stable at 6.5 percent for fiscal years 2017 and 2018, supported by favourable domestic demand and accommodative fiscal measures, including off-budget fiscal support through policy banks and public-private partnerships.

However the implications of China?s ongoing economic rebalancing will inevitably be felt by the region in the medium and long-run through trade (including commodity prices) and financial channels, albeit to a varied extent across countries, the report added.

The World Bank too decelerated India’s GDP growth for 2016-17 fiscal to 7 percent from its previous estimate of 7.6 percent citing the impact of demonetization. The UN report does not make any mention of the withdrawal of the high-denomination 500 and 1000 currency notes by the Indian government nor its impact on the country’s economic growth.

The report said India has positioned itself as the most dynamic emerging economy among the largest countries and is expected to remain the fastest growing on the back of robust private consumption and significant domestic reforms gradually being implemented by the government. It estimated that in the 2016 fiscal, India grew by 7.6 percent.

In India, “investment demand is expected to slightly pick up, helped by monetary easing, government efforts towards infrastructure investments and public-private partnerships, and the implementation of domestic reforms such as the introduction of the Goods and Services Tax (GST) Bill,” the report said.

It added that the GST reform constitutes a “major change” by establishing a new uniform tax rate.

The reform should promote investment in the medium term through lower transaction and logistic costs and efficiency gains. Its effective implementation requires adequate capacity building of the tax administration.

The report added that in India, in spite of a strong emphasis on rural areas and infrastructure investments on the expenditure side, fiscal policy has largely followed a cautious approach and the budget deficit is expected to further decline gradually.

For 2016/17, the deficit is projected to reach 3.5 percent of GDP and is on track to meet the medium-term target of 3.0 percent of GDP.

On inflation, the report forecast consumer price inflation for India at 5.7 in 2017, declining slightly to 5.4 in 2018.

The report said the world economy expanded by just 2.2 percent in 2016, the slowest rate of growth since the Great Recession of 2009. World gross product is projected to grow by 2.7 percent in 2017 and 2.9 percent in 2018, a slight downward revision from the forecasts made last May.

Although a modest global recovery is projected for 2017-18, the world economy has not yet emerged from the period of slow growth, characterised by weak investment, dwindling trade and flagging productivity growth, the report added.

Launching the report here, Assistant Secretary-General for Economic Development, United Nations Department of Economic and Social Affairs, Lenni Montiel underscored the “need to redouble the efforts to bring the global economy back on a stronger and more inclusive growth path and create an international economic environment that is conducive to sustainable development”.

It added that global oil demand continued to grow in 2016 but the pace of growth was slower than in 2015 as the positive boost from low oil prices to consumption growth waned. ?Oil demand was driven mainly by robust consumption in the large emerging economies, particularly China and India,? the report said adding oil demand is expected to continue strengthening in line with the projected improvement in global growth. Growth in oil demand will remain supported mainly by the United States and the large emerging economies, particularly China and India.

Growth in developing economies slowed to a meagre 3.6 percent in 2016, the slowest pace of expansion since the global financial crisis, mainly due to lower commodity prices, weak global trade and persistent uncertainties in the world economy. Going forward, average growth in developing economies is expected to pick up to 4.4 percent in 2017 and 4.7 percent in 2018 on the back of a moderate recovery in Africa, Latin America and the Caribbean and Western Asia.

The report noted that fragilities in the banking sector and stressed balanced sheets of corporates remain important challenges for some economies. It cited the Indian government’s commitment to a USD 3.7 billion package to recapitalise state-owned banks, saying various regulations have been introduced in order to reduce banks’ financial exposures and to encourage private participation in the banking sector.

“Although countries should try to avoid a sudden tightening of monetary and liquidity conditions in the outlook period, policy measures will critically depend on the evolution of external factors, such as oil prices,” it said.